FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2017

Investments, All Other Investments [Abstract]

Financial Instruments Disclosure [Text Block]

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amount and estimated fair value of financial instruments, not previously presented, as of December 31, 2017 and 2016 were as follows:

					Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
December 31, 2017
Assets:
Cash and due from financial institutions	$	3,432	$	3,432	$	3,432	$	–	$	–
Short-term interest-earning deposits		46,977		46,977		46,977		–		–
Portfolio loans, net		757,506		748,594		–		742,387		6,207
Loans held-for-sale		3,623		3,858		–		3,858		–
Warehouse loans held-for-investment		81,687		81,687		–		81,687		–
Federal Home Loan Bank stock, at cost		9,892		9,892		–		–		9,892
Bank owned life insurance		18,005		18,011		–		18,011		–
Accrued interest receivable		2,267		2,267		–		2,267		–
Liabilities:
Deposits		675,803		676,383		–		676,383		–
Federal Home Loan Bank advances		213,525		213,876		–		213,876		–
Accrued interest payable (reported on consolidated balance sheets in accrued expenses and other liabilities)		227		227		–		227		–

December 31, 2016
Assets:
Cash and due from financial institutions	$	3,744	$	3,744	$	3,744	$	–	$	–
Short-term interest-earning deposits		56,149		56,149		56,149		–		–
Portfolio loans, net		639,245		652,133		–		644,155		7,978
Loans held-for-sale		7,147		7,281		–		7,281		–
Warehouse loans held-for-investment		80,577		80,577		–		80,577		–
Federal Home Loan Bank stock, at cost		8,792		8,792		–		–		8,792
Bank owned life insurance		17,535		17,546		–		17,546		–
Accrued interest receivable		1,979		1,979		–		1,979		–
Liabilities:
Deposits		628,413		628,714		–		628,714		–
Federal Home Loan Bank advances		188,758		189,842		–		189,842		–
Accrued interest payable (reported on consolidated balance sheets in accrued expenses and other liabilities)		121		121		–		121		–

Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest, demand and savings deposits and variable rate loans or deposits that re-price frequently and fully. Fair value of securities held-to-maturity is based on market prices of similar securities. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life without considering the need for adjustments for market illiquidity or credit risk. Fair value of loans held-for-sale is based on quoted market prices, where available, or is determined based on discounted cash flows using current market rates applied to the estimated life and credit risk. Carrying amount is the estimated fair value for warehouse loans held-for-investment, due to the rapid repayment of the loans (generally less than 30 days). Fair value of BOLI is based on the insurance contract cash surrender value or quoted market prices of the underlying securities or similar securities. Fair value of the FHLB advances and securities sold under agreements to repurchase (repurchase agreements) is based on current rates for similar financing. It was not practicable to determine the fair value of the FHLB stock due to restrictions placed on its transferability. The estimated fair value of other financial instruments and off-balance-sheet commitments approximate cost and are not considered significant to this presentation.

The Bank is a member of the FHLB and as such, is required to maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from and sold to the FHLB based upon its $100.00 par value. The stock does not have a readily determinable fair value and, as such, is classified as restricted stock, carried at cost and evaluated for impairment. Accordingly, the stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time that such a situation has persisted, (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance, (c) the impact of legislative and regulatory changes on the customer base of the FHLB and (d) the liquidity position of the FHLB. The Company did not consider the FHLB stock to be impaired as of December 31, 2017 and 2016.

Atlantic Coast Financial CORP 10-K